Making Health Insurance More Accessible

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On Tuesday, May 10, 2011, the U.S. Department of Health and Human Services released a report on the uninsured population and their ability to pay their hospital bills.  One of the more interesting takeaways from the report is that if you add up all the savings of the uninsured with incomes over 400 percent of the federal poverty level (or about $88,000 for a family of four), it will cover about 37 percent of their total hospital bills.

How do the uninsured get away with not having the assets to pay their bills? Well, the average uninsured person only pays for about a quarter of their total health care costs. Taxpayers end up covering about 75 percent of the unpaid tab through direct payment and extra disproportionate share hospital (DSH) payments made by Medicaid and Medicare, while those with private insurance, hospitals, and charities pick up the rest.

Some analysts will want to use this as an argument for why the individual mandate in Obamacare that requires people to have health insurance is necessary. However, Obamacare will only make the problem worse by loading insurance premiums with mandated coverage and thus driving up the price of insurance. People need the option to buy inexpensive health insurance that is actual insurance against low probability, but high cost medical care.

In addition, there are steps that can be taken to encourage people to buy insurance:

  • One way to help the uninsured would be to replace the tax exclusion for employer sponsored health care with a tax credit and voucher that can be used to buy health insurance, available to all tax filers, regardless of whether they buy insurance through their workplace or on their own. Many of the uninsured would rethink their decisions to buy insurance, since not doing so would mean leaving a significant refund from the IRS on the table. For those with access to employer-sponsored insurance, this would enable consumer choice. Instead of being stuck with whatever plan their employer chose, workers would now be able to shop around among competing plans – picking one that best suits them and their family.
  • Another way to help the uninsured would be to repeal Obamacare’s mandates on insurance to cover certain medical services. If left intact, these mandates will increase health insurance premiums. The more benefits that a health plan must include, the more costly that plan will be, thereby making it more difficult for people to purchase coverage. According to analysis done by several former members of the President’s Council of Economic Advisors, for each additional mandate, the price of an individual policy increases by 0.4 percent, and for a family policy the price increases by 0.5 percent. Adding ten new mandates would increase the price by around 4 to 5 percent for plans that are in the non-group (individual) market. The example of Maryland shows that having a large number of mandated benefits can have a significant impact on premiums. According to a study by the Maryland Health Care Commission, state mandates account for 18.6 percent of the cost of a premium in the individual market.  The evidence is clear, the more benefits mandated the more difficult it will be to afford health insurance.

It is clear that Obamacare will only make insurance more unaffordable for those already uninsured. There are steps, however, that Congress can take the help the uninsured by first repealing Obamacare and replacing it with the proposals outlined in Heritage’s plan for “Saving the American Dream.”

Source material can be found at this site.

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